MSCI BIC Index Definition

What Is the MSCI BIC Index?

The MSCI BIC index measures the equity market performance of the emerging market indices of Brazil, India, and China. The index is one of MSCI's Regional Equity Indices and is a free float-adjusted, market capitalization-weighted index of four of the biggest emerging market economies. It was launched and operated by MSCI, which provides a variety of financial products and services. The index initially included Russia and was called the MSCI BRIC Index until the company reclassified Russia as uninvestable in 2022.

Understanding the MSCI BIC Index

MSCI is an American financial company that specializes in research, data, and technology. It provides financial support and tools that investors can use to make better decisions about their investments. Some of these options include portfolio management tools and analytics. But MSCI is perhaps best known for its indexes. These range from niche investing to country- and region-based investing.

The MSCI BIC Index was launched on Dec. 30, 1994. This is a free float adjusted and weighted by market capitalization. It was based on the performance of the equity market of the four largest and fastest-growing emerging market economies: Brazil, India, and China.

The index is reviewed on a quarterly basis: February, May, August, and November. This prevents any undue index turnover while accounting for any changes in the underlying equity markets of each country. The index has 918 constituents and is rebalanced every May and November, at which time the small-, mid-, and large-cap cutoffs are recalculated.

The index is heavily weighted in the consumer discretionary industry (22.54%) followed by financials (19.56%) and communication services (12.96%). More than half of the index was represented by China at 60.89% while India and Brazil made up the remainder with 28.2% and 10.91%, respectively. As of July 31, 2023, the index returned 3.43% to investors over a 10-year period and 6.21% over one year. It earned 6.52% since its inception in 1994.

Special Considerations

An emerging market economy is one that progresses toward becoming advanced, as shown by liquidity levels in local debt and equity markets, as well as the existence of some form of market exchange and regulatory body. Emerging markets are not as advanced as developed countries but maintain economies and infrastructures that are more advanced than frontier market countries.

Emerging markets generally do not have the level of market efficiency and strict standards in accounting and securities regulation to be on par with advanced economies, such as the United States, Europe, and Japan, but emerging markets typically have a physical financial infrastructure. This comes in the form of banks, stock exchanges, and a unified currency.

Investing in these countries and other emerging markets does come with inherent risks. That's because the markets are not fully developed. Risks such as lack of transparency, undeveloped regulatory systems, liquidity issues, and volatility can affect the performance of investments.

History of the MSCI BIC Index

As noted above, the index was launched by MSCI on Dec. 30, 1994, as the MSCI BRIC Index. As such, it included Russia along with Brazil, India, and China. Russia's rich natural resources, stabilizing financial sector, and willingness to open itself to international markets after the fall of the Soviet Union appealed to investors and analysts alike who were looking for new opportunities.

On March 2, 2022, MSCI reclassified Russia from Emerging Markets to Standalone Market status, which led the firm to drop the country from the index. The decision closely followed Russia's invasion of Ukraine on Feb. 24, 2022. After consulting international institutional investors, the participants voted by an overwhelming majority that the Russian equity market is currently "uninvestable," and should be removed from the index. As a result, the index is now comprised of three economies: Brazil, India, and China.

Investing in Emerging BIC Markets

Investors can gain exposure to these markets (and other emerging market economies) through an increasing variety of instruments. Some of these options include:

• American Depositary Receipts (ADRs)
• Closed-end funds
• Exchange-traded funds (ETFs)
• Mutual funds

One investment example includes the MSCI BIC Index ETF (BKF), which was launched by iShares in 2007. As of Sept. 1, 2023, this ETF had 644 constituents and $71.4 million in assets under management (AUM). The management fee for the fund was 0.69%.

The Bottom Line

Indexes are commonly created as a way to measure financial or economic data such as interest rates, inflation, or manufacturing output. They're also used as benchmarks that track the performance of a group of related assets in one way. The MSCI BIC Index is a free float-adjusted market cap-weighted index that measures the equity performance of the economies of Brazil, India, and China. The best way to take advantage of the index's returns is to invest in an ETF or mutual fund that mimics its returns.